On September 13th, *ST Aonong (603363.SH), which is deeply trapped in debt, has made significant progress on the road to restructuring, and a joint venture consisting of several state-owned enterprises has become the selected investor in the company's restructuring.

After the market closed today, *ST Aonong announced that on September 13th, the Aonong Group's Restructuring Investor Selection and Review Committee, composed of Fujian Aonong Biological Technology Group Co., Ltd. and Zhangzhou Aonong Investment Co., Ltd. (collectively referred to as Aonong Group), confirmed the selection of the Quanfa Foreign Trade Joint Venture (including Quanzhou Development Group Co., Ltd., Hubei Grain Co., Ltd., and China Foreign Economic and Trade Trust Co., Ltd.) as the selected investor in the Aonong Group's restructuring, based on the "Aonong Group Restructuring Investor Selection and Review Rules and Scoring Details" in accordance with the law.

The ultimate controllers of the joint venture companies selected as the investors in the restructuring are all state-owned capital, as noticed by reporters from Caijing. According to the equity transparency displayed on Tianyancha, the ultimate controller of Quanzhou Development Group Co., Ltd. is the Quanzhou State-owned Assets Supervision and Administration Commission, the ultimate controller of Hubei Grain Co., Ltd. is the Hubei Provincial State-owned Assets Supervision and Administration Commission, and the ultimate controller of China Foreign Economic and Trade Trust Co., Ltd. is the State Council.

Looking back at history, *ST Aonong, as a rising star among A-share listed pig companies, has achieved a compound annual growth rate of as high as 69.40% in the past six years, with the output increasing from 0.42 million heads in 2018 to 5.859 million heads last year, ranking sixth among A-share listed pig companies.

However, the rapid expansion encountered the debt pressure brought by the downturn in the pig cycle. After three consecutive years of significant losses, the company finally reached its breaking point and was forced to embark on the path of pre-restructuring. On February 5th of this year, the company received the pre-restructuring approval notice and the decision to appoint a temporary administrator from the Intermediate People's Court of Zhangzhou City, Fujian Province. The Zhangzhou Intermediate Court decided to initiate pre-restructuring of the company.

After initiating pre-restructuring, the company's debt pressure continued to accumulate. As of September 10th, 2024, the company's total overdue debt principal and interest in banks, finance leasing companies, and other financial institutions is approximately 4.979 billion yuan (deducting the amount already repaid), accounting for 517.10% of the most recent audited net assets of the company.

Behind the high debt pressure, both the sales volume and inventory of the company's pigs have been significantly affected. In August, the company's hog sales volume was 0.1183 million heads, a decrease of 74.19% compared to the same period last year, and the hog inventory was 0.5069 million heads, a decrease of 75.95% compared to the same period last year. From January to August, the company's cumulative sales volume of hogs was 1.6241 million heads, a decrease of 57.59% compared to the same period last year.

With the selection of investors in this reorganization, all of whom are state-owned capital with strong strength, it may give the shareholders of the company a reassuring pill. According to the semi-annual report, as of June 30, 2024, the number of shareholders of the company decreased by 0.0405 million households compared to the previous period (March 31, 2024), but there are still 0.0561 million households.

It should be noted that the announcement stated that the company and its controlling shareholder have not yet signed a reorganization investment agreement with Quanfa Foreign Trade United Group, and the specific terms of the reorganization, payment arrangements, etc. have not been determined. There is still uncertainty as to whether the company and its controlling shareholder can sign a reorganization investment agreement with Quanfa Foreign Trade United Group.

In addition, the company announced on the same day that the company and relevant responsible personnel received a warning letter from the Fujian Securities Regulatory Bureau. After investigation, the Fujian Securities Regulatory Bureau found the following problems with the company and its controlling shareholder Zhangzhou Aonong Investment Co., Ltd.: failure to timely disclose litigation and arbitration matters; failure to timely disclose default on matured debts; failure to timely disclose external guarantees; failure to timely disclose the pledge of the controlling shareholder's equity.